Standex International's Q1 2026: Contradictions Surface on Electronics Growth, Capacity Expansion, and Operating Margins

Date of Call: October 31, 2025

Financials Results

• Revenue: $217.4M, up 27.6% YOY
• EPS: $1.99 adjusted EPS, up 8.2% YOY
• Operating Margin: 19.1% adjusted operating margin, up 210 basis points YOY

Guidance:

• Raised fiscal 2026 sales outlook: expect revenue to grow by over $110 million (up $10M vs prior guidance).
• Standex Electronics Grid (Amran/Narayan) expected to grow >20% YOY in fiscal 2026.
• New product sales expected to contribute ~300 bps of incremental sales growth; new product sales expected to be ~ $78M in FY2026.
• Fast-growth markets expected to grow >45% YOY and exceed $270M in revenue.
• Q2 FY2026: significantly higher YoY revenue (mid-single-digit organic growth + acquisitions); sequentially slightly higher revenue and slightly lower to similar adjusted operating margin.
• FY2026 capex expected $33M–$38M; Q2 interest expense ~$8M–$8.5M.

Business Commentary:

* Revenue Growth and New Product Success: - Standex International reported a 27.6% increase in sales for the fiscal first quarter 2026, contributing to a strong start of the fiscal year. - The growth was driven by new product sales, which grew more than 35% to approximately $14.5 million, and sales in fast growth markets, which accounted for 30% of total sales. - The company's new products, especially those in the Electronics segment, are expected to contribute more than 300 basis points of incremental sales growth in fiscal 2026, indicating a strong performance in new product development and market penetration.

• Strong Performance in Acquired Businesses:
• The Amran/Narayan Group, renamed as Standex Electronics Grid, delivered record sales exceeding $35 million, achieving nearly 35% growth year-on-year.

• This performance was attributed to robust end market demand within data centers, electrification, and grid modernization, with a focus on geographic expansion in Croatia and Mexico.

• Adjusted Operating Margin Improvement:

• Standex's adjusted operating margin increased by 210 basis points year-on-year to 19.1%, primarily due to contributions from the Amran/Narayan Group acquisition and productivity initiatives.

• The increase in margins indicates effective cost management and strategic investments in high-growth areas, enhancing overall operational efficiency.

• Geographic Market Expansion:

• Sales in fast-growth markets reached approximately $62 million, accounting for 30% of total sales, with a focus on commercialization of space and defense opportunities.
• The company's strategic expansion in fast-growth markets like Croatia and Mexico supports the continued growth in end markets with strong demand, positioning Standex for future

Sentiment Analysis:

Overall Tone: Positive

• Management raised FY26 revenue outlook ("expect revenue to grow by over $110 million"), reported record orders (~$226M, "highest quarterly intake ever"), improved adjusted operating margin to 19.1% (up 210 bps YOY), and reduced net leverage to 2.4x — all indicating constructive momentum and financial progress.

Q&A:

• Question from Christopher Moore (CJS Securities, Inc.): At some point, I don't know, either Q3 or Q4 call, you talked about Standex being roughly 2/3 of the way in this optimization journey other than potentially selling 1 of the business segments, what are the biggest areas of focus to help this further on the optimization journey?
  Response: Primary focus is on organic growth—scaling new product development and fast‑growth markets; portfolio simplification remains possible but secondary to realizing organic potential.

• Question from Christopher Moore (CJS Securities, Inc.): You talked about new products a couple of times, 15 this year. Are there a few that really kind of stand out in terms of -- that are being introduced this year?
  Response: Key launches include two new relays targeting test & measurement (driven by electrification/data centers) and an expanded ultra‑low temperature freezer in Scientific.

• Question from Christopher Moore (CJS Securities, Inc.): Amran/Narayan is performing exceptionally well, 30% growth. You're talking about 20% this year. Is there any slowing down in growth at this point in time? And you just opened up Croatia, it sounds like there's lots of opportunities there?
  Response: No slowdown observed; bookings remain strong, Croatia site ramping and Mexico capacity being allocated to support further Amran/Grid growth.

• Question from Ross Sparenblek (William Blair & Company L.L.C., Research Division): Sticking with electronics here. Can you maybe just help us think about some of the momentum you're seeing, particularly in the legacy business, what end markets, what stands out?
  Response: Momentum is broad: strong bookings in defense, switches & sensors (North America/Asia), test & measurement and distribution, with OEM orders converting over a longer cycle.

• Question from Ross Sparenblek (William Blair & Company L.L.C., Research Division): When we think about kind of the mix profile the backlog is magnetic the biggest piece of growth being the lower mix product line?
  Response: No — order growth was similar across SST (switches/sensors) and magnetics; no material shift to lower‑mix products.

• Question from Ross Sparenblek (William Blair & Company L.L.C., Research Division): When we think about kind of the lead times on converting this and then maybe the incrementals and the type of operating leverage we should expect for the legacy business given the prior cost out as we think about the second half of 2026?
  Response: Rough conversion: ~30% ships within 3 months, another ~30% next quarter and remainder later; margins should improve but will be partly offset by growth investments (e.g., Croatia ramp).

• Question from Ross Sparenblek (William Blair & Company L.L.C., Research Division): You guys have taken out like something like $7 million or $9 million of prior cost out actions that we haven't really seen because of the destocking over the last couple of years. So there should be some natural lift there, right?
  Response: Yes — prior cost‑out actions should yield natural margin lift as volumes normalize.

• Question from Michael Shlisky (D.A. Davidson & Co., Research Division): Is your effort really not just across Amran, or across the entire electronics segment? Is there 1 brand being presented to the entire customer base? I wasn't sure if it was beyond just the Amran.
  Response: Amran/Narayan is being rebranded to 'Standex Electronics Grid' to allow broader expansion; other electronics businesses will be described as Edge (magnetics) and Detect (switches/sensors).

• Question from Michael Shlisky (D.A. Davidson & Co., Research Division): Can you give us a broader view on the impact of the government shutdown on your business? Maybe you can talk individually about business and also kind of broadly, is there a number we can point to as to what that might be affecting your business today?
  Response: No immediate material impact from the recent shutdown; Scientific and some North American businesses face uncertainty from prior NIH funding cuts, but no quantifiable incremental effect cited from the shutdown.

• Question from Michael Shlisky (D.A. Davidson & Co., Research Division): Was there any onetime tax in the cash repatriation there?
  Response: No significant one‑time tax; routine withholding may apply but repatriation was managed quarterly with no material tax impact.

• Question from Gary Prestopino (Barrington Research Associates, Inc., Research Division): The growth in sales, especially from new products and fast-growth markets. Is that safe to assume that the bulk of that is really a function of products going into data centers, Grid modernization, etc., or is it spread around the 5 fast growth markets?
  Response: Roughly half of fast‑growth (~$270M) is data center/electrification/Grid (Amran); remainder spread across space, defense and EV; current new product sales largely outside fast‑growth but future launches skew toward fast‑growth.

• Question from Gary Prestopino (Barrington Research Associates, Inc., Research Division): You initiated production in Croatia; can you give us some idea of capacity for production at that plant?
  Response: Conservative plan assumes Croatia could reach about $60M in sales over 3–5 years, with room to expand capacity if needed.

• Question from Gary Prestopino (Barrington Research Associates, Inc., Research Division): On Slide 3 the 15 product launches and the bars to the right $55 million and $78 million, that's the actual sales you expect to attain from the new product?
  Response: Yes — those are dollar figures: $55M last year and expected ~$78M in new product sales this year.

• Question from Matt Koranda (ROTH Capital Partners, LLC, Research Division): Can you talk about order trends at Amran/Narayan and how that informs the view on the 20% growth this year?
  Response: Book‑to‑bill is ~1.05–1.07 with a record Q1 sales quarter >$35M; orders remain strong and support the raised growth outlook (>20%).

• Question from Matt Koranda (ROTH Capital Partners, LLC, Research Division): What types of products would you look to acquire or develop to fill gaps in the Grid portfolio?
  Response: Target adjacencies are additional transformer/transformer‑related products electrical OEMs buy; pipeline exists but no specific deals or products disclosed.

• Question from Matt Koranda (ROTH Capital Partners, LLC, Research Division): With leverage now in the low‑2s and expected to decline, what's the appetite for bigger acquisitions and any nearer‑term portfolio simplification actions?
  Response: Management is reducing leverage while building acquisition 'powder'; they expect continued portfolio simplification when the right opportunities arise but gave no timing.

• Question from Ross Sparenblek (William Blair & Company L.L.C., Research Division): Engraving pipeline showing activity — how quickly can margins get to or beyond 20% with volume recovery?
  Response: Engraving market is stabilizing; recent site closures (15 over years plus latest 4) will drive savings beginning in H2, and 20%+ margin is achievable as volumes recover.

Contradiction Point 1

Electronics Growth and Order Trends

It involves differing perspectives on the order trends and growth outlook for the Electronics segment, which is crucial for understanding the company's revenue trajectory and market performance.

What are the order trends and growth outlook for Amran/Narayan given the book-to-bill is at 1x? - Matt Koranda (ROTH Capital Partners, LLC, Research Division)

2026Q1: The book-to-bill is over 1, supporting the growth rate of nearly 30% seen in the past. - David Dunbar(CEO)

What is the run rate demand in Electronics, and what are the assumptions for fiscal 2026? - Ross Riley Sparenblek (William Blair & Co.)

2025Q4: The Electronics segment reported a book-to-bill ratio of 1.3x and saw a 16% increase in orders. - David A. Dunbar(CEO)

Contradiction Point 2

Capacity Expansion and Production Plans

It highlights differences in the planned capacity expansion and production timelines for the Amran/Narayan segment, which can impact the company's ability to meet demand and revenue projections.

Can you discuss the brand's plans for the electronics segment? - Ross Sparenblek (William Blair & Company L.L.C., Research Division)

2026Q1: We are adding second shifts in Houston and India. - David Dunbar(CEO)

How will capacity expansion at Amran/Narayan in North America and Europe impact your growth outlook? - Michael Shlisky (D.A. Davidson & Co.)

2025Q4: Estimated to be up and running with initial production run at $5 million to $10 million by May of 2026, with capacity to grow to $30 million in 3 years. - David A. Dunbar(CEO)

Contradiction Point 3

Operating Margins and Enhancement Initiatives

It reveals disparities in the expected impact of operating margin enhancement initiatives, which are critical for understanding the company's cost management and profitability strategies.

Is the sales growth from new and fast-growing markets primarily driven by data centers and Grid modernization? - Gary Prestopino (Barrington Research Associates, Inc., Research Division)

2026Q1: The operating margin in the quarter was 20.1%. Operating margins improved by 10 basis points during the quarter. - Ademir Sarcevic(CFO)

How does sales growth in high-growth markets affect operating margins? - Gary Prestopino (Barrington Research)

2025Q4: We expect to be at or above 23% for adjusted operating margins within the next 3 years, up from 19% in FY '23. - Ademir Sarcevic(CFO)